Monthly Archives: May 2015

Demonstrators at the CPUC call for a shutdown of PG&E’s Diablo Canyon, California’s last operating nuclear reactors. EON photo

The Iron Law of PUC Corruption
In 2006 Werner Troesken published a paper in the National Bureau of Economic Research publication ‘Corruption and Reform: Lessons from America’s Economic History’ entitled Regime Change and Corruption. A History of Public Utility Regulation. In it Troesken looked at the history of public utilities commissions and wondered why, despite both public and private attempts at reform, utility regulation seems always to lapse into corruption. Here’s how he describes his hypotheses and research findings in what might be called Troesken’s Iron Law of PUC Corruption:

“First, corruption is endemic to public utility industries; corruption exists, in some form, across all regulatory and ownership regimes. Second, regime change in utility industries does not eliminate corruption; it only alters the type of corruption observed. Third, for any type of governance regime (e.g., state regulation or municipal ownership) corruption grows increasingly severe over time and, at some point, becomes politically untenable.” pg. 260

He concludes,

“Based on the historical evidence presented above it appears that corruption, and the necessity to eliminate corruption when it gets too costly, accounts for the efficacy of regime change. In this context, the direction of regime change—from public to private, or private to public—is of second-order importance. What matters is some radical reshuffling of the institutional matrix to disrupt the underlying corrupt relationships. Unfortunately, this disruption is only temporary, and gradually new forms of corruption emerge and must again be broken down by institutional change.” Pg. 278

Cartoon thanks to emfsafetynetwork.org and narellecartoons.com

PUCs’ Dominant Corruption Gene – President Picker’s Perplex
California’s Public Utilities Commission could serve as the poster child for Troesken’s Iron Law. The CPUC was established in 1911 under progressive era Governor Hiram Johnson as a result of a popular initiative and constitutional amendment stimulated by widespread public outrage about Robber Railroad Barrons’ corruption of California’s politics and economy.

Over the years the Commission has grown into a complex, hydra-headed bureaucracy, which – despite its mind-boggling system of functionaries, rules and procedures – is nevertheless vulnerable to manipulation by both internal and external actors.

Now, a century later, the agency intended to protect the public against corporate greed and incompetence has become, as former CPUC President Loretta Lynch puts it, “a rogue agency.” Almost daily revelations of endemic corruption continue to suggest a system approaching unreformability.

Newly appointed President Michael Picker – long a Gov. Brown insider – has promised ‘transparency,’ while, at the same time, the agency is spending up to $5.2 million for the services of the high end law firm Sheppard Mullin to respond to the multiple criminal investigations now underway. The first task of Sheppard Mullin was to advise on which documents to release, withhold or redact in the face of public record requests in order to protect the CPUC from too much transparency.

‘Regime Change’ for the CPUC? AB 825
So, following Troesken’s Iron Law, what would constitute a “radical reshuffling of the institutional matrix to disrupt the underlying corrupt relationships,” even if the effects of “this disruption is only temporary?”

On February 6, 2015 California Assemblymember Anthony Rendon, whose 63rd District covers nine SoCal cities and a swath of northern Long Beach, introduced Assembly Bill 825 which aims at answer that question. As amended in the Assembly on April 20, 2015, AB 825 would amend and revise portions of the state’s Public Utilities Code, relating to the Public Utilities Commission. California State Senators Jerry Hill and Mark Leno have also weighed in with amendment suggestions. Sen. Leno is sponsoring SB 215, a parallel CPUC reform bill in the State Senate.

EON will submit the following recommendations and continue to report on this important issue. As ‘official intervenors’ on behalf of the public interest in CPUC proceedings over the last several years, we have a few preliminary issue suggestions we hope a final bill combining AB 825 and SB 215 – as eventually passed – will address:

We need rigorous enforcement of CPUC sections 451 & 453 (b) that have been egregiously ignored in the case of the forced installation of so-called ‘smart’ meters.
Particularly:

451 ” Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities … as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public.” [emphasis added]

and

453 (b) “No public utility shall prejudice, disadvantage, or require different rates or deposit amounts from a person because of ancestry, medical condition, marital status or change in marital status, occupation, or any characteristic listed or defined in Section 11135 of the Government Code.” [emphasis added]

In the case of “smart” meters, thousands of ratepayers vociferously objected to the forced installation of the electronic RF-emitting meters. Hundreds reported serious health affects and injuries.
Those suffering from exposure to banks of multiple meters in apartments, condominiums and business offices are at serious risk. Fires, interference with other wireless devices, bill over-charging and privacy impacts from the microwave-emitting meter’s mega-data-gathering to be sold to third parties are all impacts that were reported to a non-responsive CPUC in addition to the adverse health effects. Despite people objecting in many ways, the CPUC ignored their pleas and instituted an upfront and monthly fee for those demanding to retain the old mechanical meter. This is paying to NOT have this dangerous meter that Attorney General reports from Illinois and other states have determined to have no advantage to ratepayers.

In a stinging letter to the state Department of Public Utilities Commission, for instance, a lawyer from Massachusetts Attorney General Martha Coakley’s office pointed to large-scale tests in Illinois and elsewhere in which the meters failed to justify their costs. Michigan Attorney General Bill Schuette filed suit in the state appeals court, stating that there is no net economic benefit to consumers resulting from the use of smart meters and that there is unlikely to be any future benefit. The court of appeals agreed. Illinois Attorney General Lisa Madigan agreed with Schuette, stating: “The utilities have shown no evidence of billions of dollars in benefits to consumers from these new meters, but they have shown they know how to profit. “

Unimpeded Media Access in accordance with California’s 2004 Bagley-Keene Open Meeting Act for both corporate AND independent media organizations and citizen journalists.

Ex parte Rule Violations must be prosecuted and prevented by a change in the Commission’s management culture. The institutionalized attitude toward ‘public advocates as enemies’ and utility officials as friends must be changed.

Authentic Public Access to Commissioners – Members of the public and advocacy group representatives should be able to meet with Commissioners and their aides with appropriate ex parte reporting, not just utility executives. Commissioners and staff must officially receive and register communications from the public.

Complaint Processing – Public complaints should be officially received and published online as well as concrete actions taken to address the problems.

Transparency in Renewable Energy Accounting – The CPUC should mandate utilities to track solar roof top electricity generation in order to be able to fully utilize it via substations. The amount of renewable energy thus generated should be transparently reported. Currently, it is not tracked.

Transparency in Utilities’ Energy Efficiency Program Reporting – CPUC awarded large bonuses to utilities for unsubstantiated Energy Efficiency Program gains. CPUC currently gives ratepayer-based Energy Efficiency funds to utilities and disallows them to be used by cities and other entities who have no conflict of interest in saving energy and whose EE programs have genuinely produced results in the past.

Public Comments – Members of the public and advocacy group representatives must be allowed to speak in the ‘open comment’ period before business meetings without unfair limits being imposed. Spokespeople should not be prohibited from speaking on a given issue if they have already addressed it in previous meetings.

Administrative Law Judges must be randomly chosen, not ‘shopped’ for their friendliness to the interests of certain parties in Commission proceedings. Attorney Larry Bragman, formerly Mayor of Fairfax, CA and current Marin County Water Board Member, who has familiarity with past and current CPUC functioning, puts it this way:

“The CPUC’s administrative law judges should be assigned cases randomly (as in Federal and State Court) and not by the commissioners. That would reduce the influence of individual commission members to cherry pick judges and influence hearings.

“Once assigned a case, the law should require that ALJ’s adhere to the same judicial code of conduct and ethics that Superior Court judges follow. No more back door meetings with litigants or commissioners.”

Commissioners Should be Elected, rather than appointed. Elections should be open to candidates from all stakeholder sectors, not just corporate and political circles and utility-friendly NGOs, but from Citizen Groups as well.

Legal Challenge of Decisions – proceeding decisions must be open to direct and timely challenge in Superior Court, rather than in the appellate courts.

Online User Friendliness – the Commission website should be updated and streamlined to support non-expert access. Complex forms should be simplified. The video archive should be upgraded for greater video quality and accessibility.

Overly complex and burdensome technical and procedural barriers to public and intervenor input should be removed.

Intervenor Compensation Requests should be evaluated and ruled upon by a randomly-chosen Administrative Law Judge other than the ALJ of the proceeding in which the intervenor participated. Compensation payments should not be punitively manipulated or delayed in relation to the identity or policy position of the intervenor .

We observed an example of this when a dying intervenor’s compensation was deliberately withheld by the CPUC, though it was known, according to a former CPUC Commissioner who spoke with someone in the business office, that the money was needed for the intervenor’s cancer treatment. The check arrived after her death.

We support California legislators Rendon, Hill and Leno in their efforts at CPUC ‘regime change,’ while remembering Troesken’s Iron Law, “What matters is some radical reshuffling of the institutional matrix to disrupt the underlying corrupt relationships. Unfortunately, this disruption is only temporary, and gradually new forms of corruption emerge and must again be broken down by institutional change.”

Nineteenth century abolitionist Wendell Phillips put it this way in a speech before the Massachusetts Antislavery Society in 1852, “Eternal vigilance is the price of liberty.”
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